Q1. Why all/most the fanfiction we see is of western origin

    and written in english?
    Why no Japanese authors?

Hey you know what? You know the reason all the fanfics on the FFML 
are in English by English-speaking writers? That's because this is 
largely an English-speaking FFML, and most of us aren't fluent in any 
Asian languages. However, there ARE some Japanese authors here...or 
at least one. Ichinohei Hitomi is Japanese, and as I understand it 
most of the works she releases she originally wrote in Japanese.

Q2. Are the Japanese anime fans aware of western fanfiction?

I don't know about the average otaku in Japan, but I do know there is 
fanfiction in Japan just as there is in English-speaking countries. 

Q3. Are the Japanese anime/manga creators aware of the fanfiction

    based on their works? 
    Were any comments made by them concerning western fanfiction?

Interestingly enough, most of them are well aware of the existence of 
fan-written stories based on their works. Of course, in most cases 
this refers to Japanese doujinshi, but I do believe they know of the 
existence of fanfiction. In fact, at an anime con in San Diego where 
Takahashi Rumiko put in an appearance, the subject of fanfiction was 
mentioned, and her response seemed to indicate she doesn't mind it at 
all. 

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The Eternal Lost Lurker
http://pages.prodigy.com/RMorrison
Proud inventor of kusonomiyaki